Question re Splogs / Blogs

Apologies for the length of my question, wanted to give some background:

One of the sites I look after has done very well in SERPS for over a year now with page one (including several number one) rankings in google.com.au (Australia) for almost all relevant keywords, with it all based 95% on basic whitehat SEO and good solid content.

It's a reasonably low competition niche, and has no affiliates etc - just company websites. The only "grey hat" stuff I have done is automated social network submissions and a little bit of blog commenting and profile footer linking and that's it - there no need to mess with a formula that worked!

ANYWAY a competitor who never ranked very well at all (solid page 2/3 guy) has shot to top of page 1 and above me for almost everything. Checked out Yahoo site explorer, and this has all been on the back of a lot of postings (not comments) on what i would call Splogs (Spam Blogs).

These have a whole series of completely random, semi-nonsence articles on nothing in particular, with the last two words of each post being hyperlinked with keyword text to a particular website (including my competitors). There is however no relevance between the keywords and the proceeding article, and these blogs were not created by this guy I don't think - they seem to have lots of different people who the owner is putting up links for. Almost all these splogs seem to have a Pagerank of 2 so they themselves are being promoted somehow.

The questions are:
1) Is this a relevant/worthwhile strategy to copy? Or something else I should focus on?

2) Is this likely to work long term? (this particular site is one I don't want too much risk with)

3) Who would he be buying this type of link from? Would these all be owned by one SEO company for promoting their clients? - I notice a lot of the links (50%) are to Australian sites.

Note that adblockers might block our captcha, and other functionality on BHW so if you don't see the captcha or see reduced functionality please disable adblockers to ensure full functionality, note we only allow relevant management verified ads on BHW.